I’m Professor and Chair of the Department of Economics at LIU Post in New York. I’ve published several articles in professional journals and magazines, including Barron’s, The New York Times, Japan Times, Newsday, Plain Dealer, Edge Singapore, European Management Review, Management International Review, and Journal of Risk and Insurance. I’ve have also published several books, including Collective Entrepreneurship, The Ten Golden Rules, WOM and Buzz Marketing, Business Strategy in a Semiglobal Economy, China’s Challenge: Imitation or Innovation in International Business, and New Emerging Japanese Economy: Opportunity and Strategy for World Business. I’ve traveled extensively throughout the world giving lectures and seminars for private and government organizations, including Beijing Academy of Social Science, Nagoya University, Tokyo Science University, Keimung University, University of Adelaide, Saint Gallen University, Duisburg University, University of Edinburgh, and Athens University of Economics and Business. Interests: Global markets, business, investment strategy, personal success.

Can China's Large Corporations Take The World?

China’s large corporations are continuing their multi-year ascent in the global economy.

According to this year’s list of Fortune Global 500 Companies, 95 Chinese corporations made the list, up from 89 last year, 73 two years ago, and 34 in 2008. Three companies made it to the top ten, beating the US and Japan—Sinopec Group (NYSE:SHI), China National Petroleum, and State Grid.

The multiyear-ascent of Chinese corporations supports and reinforces China’s continued rise in the global economy, and has helped the country gain clout among world leaders like Angela Merkel and Vladimir Putin, who visited China recently.

Does it mean that Chinese corporations are ready to take the world, as Japanese corporations did back in the 1980s?

Not soon. Getting bigger doesn’t necessarily mean getting better—or more competitive. Chinese companies have yet to develop matching clout in the world economy, by gaining a competitive edge against their American, European, and Japanese counterparts.

In fact it’s hard to find a major segment of the world economy dominated by China’s corporations.

One reason for this discrepancy between size and clout is the ownership structure of Chinese corporations. Most of the companies that climbed onto the list are state-owned enterprises (SOEs) like Sinopec Group, China National Petroleum (9937.TW) and State Grid. State ownership constrains quick growth overseas for Chinese corporations through high profile acquisitions, as was the case with Japanese corporations in the 1980s.

For a simple reason: acquisitions like these create too much political heat.

In 2005, for instance, CNOOC failed to acquire the American oil company Unocal, due to political opposition. The same is true for Huawei’s failed acquisition of 3Com, and Chinalco’s failure to acquire a stake in Rio Tinto.

Another reason is that Chinese companies have yet to make the great leaps forward which come from the movement from imitation to innovation, as I argued in China Against Herself, which I co-authored with Yuko Arayama. Chinese companies are nowhere to be found in Forbes World’s Most Innovative Companies list.

It comes as no surprise, therefore, that Chinese companies have yet to gain the respect of institutional investors.

That’s the finding of a recently released Barron’s 2014 survey of the World’s Most Respected Companies—consistent with the findings of the 2012 and 2013 surveys.The top of the list is filled mostly with American companies. The middle of the list is also filled with American companies, though it includes a good number of European, Japanese, and Brazilian companies.

Only three Chinese companies, China Mobile, Tencent Holdings, and China Construction Bank (HKSE:0939 HK) made — it near the bottom of the list, the same number as last year.

Though the survey doesn’t provide any specific reasons for the low ranking of the Chinese corporations, it outlines the five most important criteria for including companies: strong management, sound business strategy, ethical business practices, competitive edge, and revenue and profit growth.

Obviously, Chinese corporations are lagging behind their American and European counterparts in all of these attributes, as discussed in a previous piece.

BOTTOM LINE: Chinese companies have a long way to go before they can compete effectively in world markets, gain the respect of investors, and conquer the world.

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People are too quick to judge and predict outcomes based on current performance. India and China won’t be super powers and neither they will economically soar to that of France or USA’s level. China’s and India’s future seems pretty much blurred to me. China’s collapse is inevitable and it’s near. China’s CAPITALIST economical system will create 2 two separate class i.e Poor and Rich. Middle class won’t be existing in China anymore. Let’s see how commies of China and Hindu Socialists of India will transform their country from Utopia to hell.